Jobs Report Lends Weight To A Fed Pause
U.S. 10-year bond yields declined to 3-month lows after a jobs
report showed that job growth slowed unexpectedly in July. With the
economy in a slowdown, many traders are betting that the Fed cannot raise rates
for the 18th straight time next week. A Fed has pause has now been priced
into the bond market, so investors must wait until Tuesday to see if the Fed
will indeed raise rates or pause the tightening cycle.
The U.S. dollar fell against the euro to two-month lows after
the jobs number added to a growing list of reports that point to a slowing U.S.
economy. Without interest-rate support, the dollar looks to be in trouble
against the euro and yen. The dollar also fell against the British pound,
Mexican peso and yen. Yesterday the BoE and ECB raised rates, which
prompted a rally in both currencies against the dollar. With the Bank of
Japan slated to raise rates before the year is out, the dollar could face a long
road to recovery.
The metals mostly gained across the board, with copper leading
the way. Copper gained nearly 4% on news that the world’s largest copper
mine, located in Chile, is facing a serious strike. Silver rallied 3.3%
and aluminum rallied 1.3%. Gold stuck out as a loser for the day, closing
down fractionally. With confidence in the U.S. dollar dwindling, investors
are seeking safe-haven commodities before the Fed announcement on Tuesday.
Crude oil futures fell 0.9% to close at $74.76 on the U.S.
jobs number. Investors fear that a global economic slowdown could be in
place, which could seriously affect the demand for oil. With the U.S.
faced with the prospect of pausing rate hikes, investors are shorting crude oil
in anticipation of a demand slowdown, as the U.S. is the world’s largest oil
consumer. Natural gas also fell today, down 0.6%.
Softs traded mixed to close the day. Cocoa was down
1.2%, and coffee was down 0.4%. On the other hand, orange juice and sugar
both traded up nearly 1% for the day.
The grains traded with fractional gains today. Corn was
unchanged, wheat was up 0.2%, soy was up 0.2% and oats were down 1.8%.
Meats traded mixed today. Cattle were up 1.1% while
potbellied pigs dropped 3.6% to close the day.
Employment Grows Less Than Expected In July (full
story).
John Patrick Lee